Malayan Independence, Malay Inequality, and the ‘Bargain’
Gregg Huff, Pembroke College, University of Oxford
This article analyses the origins of Malayan independence in 1957 and the accompanying socio-economic ‘bargain’ between Malaya’s main races. But just 14 years later in 1971, that bargain was reformulated. By then, it was apparent that to maintain internal peace in Malaysia’s plural society, economic inequality between Malays, Chinese, and Indians would have to change towards greater racial equity.

After independence, Malaysia’s impressive economic performance put it among the world’s foremost developing-country success stories. Remarkably swift growth was not, however, matched by a more balanced distribution of economic activity or income between the three main races. By the late 1960s, the failure to resolve distributional issues blighted Malaysia’s growth record, and ways to achieve equity became a main feature of government policy.
Political origins
Immediately after the end of World War II and during the power vacuum of 15 August to 3 September 1945 prior to British reoccupation, interracial conflicts between Malays and Chinese descended into chaos, described by Jones (1954, p. 390) as ‘near-anarchy’. As the Japanese army retreated to the cities, the wartime armed communist guerrilla Malayan People’s Anti-Japanese Army (MPAJA)—predominantly ethnic Chinese—took control of some 70 per cent of the smaller towns and villages as well as large parts of the peninsula.

The MPAJA's reprisals against Malays (and to a lesser extent Chinese and Indians) accused of collaboration were severe. Malays retaliated ferociously. Fighting ceased after the British return, but soon resumed with increased intensity and lasted until March 1946, by which time both the Malayan Communist Party and the Chinese had been ‘defeated militarily’ by the Malays. Their emergence as clear winners in the inter-racial conflict was fundamental in shaping the history of modern Malaya and the course of its plural society (Cheah, 1987, p. 296).

In 1946 Britain planned to form, and rule as a single entity, a Malayan Union consisting of the Malay states, together with Penang and Malacca, but not Singapore, which was to become a separate Crown Colony. The Malayan Union foundered almost immediately because of opposition by Malays who considered that insufficient recognition had been given to their political power (MacMichael, 1946; CO, 1945a and 1945b). The Malays’ assertion of political power was manifested in their rejection of the British plan for a Malayan Union, expressed through civil disobedience and refusal to participate in the process of government.

Revised proposals for a Federation of Malaya, with the same components as the Union and under British control, were accepted by the negotiating parties and the Federation came into being in February 1948. This British abandonment of the Malayan Union and its replacement by the Federation of Malaya marked ‘a crucial turning point in Malaya’s nation-building history’ (Cheah, 1987, p. xiii and pp. xiii–xiv; Cheah, 1981, pp. 108–111; Harper, 1999, pp. 49–51).

Throughout the Federation’s existence, British Commonwealth forces fought the guerrilla units—mainly Chinese—of the Malayan National Liberation Army, the successor to the MPAJA and military wing of the Malayan Communist Party. The war, known as the Malayan Emergency by the British and as the Anti-British National Liberation War by their opponents, was bloody. Many of the World War II guerrilla strongholds served similarly for the Liberation Army and became the Emergency’s principal battlegrounds (Harper, 1999, pp. 49–50). By the time the Emergency formally ended in 1960, Malaya had gained independence.

Malaysia: Tunku Abdul Rahman, Malaysia's first prime minister, with British Commonwealth Secretary Duncan Sandys, 1961
Source of data:
Lee Kuan Yew, Singapore's first prime minister, foreshadowed subsequent Federation–Singapore friction by embroidering on an exchange between Abdul Razak, Malaysia's second prime minister, and Sir John Martin, the chief British civil servant in charge of negotiations for Malayan independence. Razak asked when he arrived in London to negotiate: ‘Are you going to make things difficult for us?’ and Martin replied: ‘No, we are going to give it [independence] to you on a golden platter’ (Shaw, 1976, p. 106). When the inauguration of Malaysia hung in the balance in August–September 1963, Lee upped the ante by sneering at Malaya’s easy route to independence and (woundingly) saying ‘Indonesia had fought for independence whereas some countries, which he did not name, had been handed freedom on a silver platter by British royalty’ (The Times, London, 1963).

Nevertheless, the creation of Malaysia proceeded, and Singapore joined the Federation in 1963 along with the former British Borneo states of Sabah and Sarawak. Predominantly indigenous-group and Malay populations in the two Borneo states offset Singapore’s mostly Chinese demography to preserve Malaysia as majority Malay. However, the union lasted only until 1965, when Singapore was expelled and set its own course as a city state.

After Singapore left Malaysia, the country consisted of peninsular Malaysia, where over four-fifths of Malaysians lived, and the two islands of Sabah and Sarawak, with about 8 per cent and 10 per cent of the population respectively. Peninsular Malaysia divided racially between Malays who made up over half of inhabitants, Chinese who constituted about a third, and Indians some 10 per cent. Malaysia’s traditional areas, the east coast and northern states, had disproportionately large Malay settlement; most Chinese and Indians lived in the tin and rubber belt along the west coast, and especially in the cities and larger towns. Sabah and Sarawak were each approximately two-thirds indigenous communities and Malays, with Sarawak a third Chinese and Sabah just over a fifth.
The bargain

Continuance of a plural society in an independent Malaya required, after the British departure, the re-establishment of a balance between the races that was acceptable to all and on which the maintenance of any plural society depends. Achievement of that equilibrium in Malaya entailed overcoming Malay misgivings about being overwhelmed by non-Malays, largely Chinese, who were over a third of the population and, along with Europeans, dominated the economy. The ‘Bargain of 1957’, much of it formally incorporated in the Malayan constitution, accommodated—though in the event only temporarily—the peaceful continuance of a plural society by recognizing the special position of Malays as Malaya’s indigenous people—Bumiputera or ‘sons of the soil’.

The constitution specified Malay as the official language and Islam as the state religion. The institutions and symbols of the state were Malay or British. Considerable amounts of land were reserved for the exclusive use of Malays—as Britain had done since 1913 to ensure the continuance of their traditional way of life—to allow a mode of living which, still at the beginning of the 1980s, made Malaysia’s major towns ‘foreign ground to most rural Malays’ (Bailey, 1983, p. 11). In exchange, non-Malays were given automatic citizenship if born after independence day, 1957, or otherwise had accessible paths to citizenship. There was a guarantee of the private use of non-Malay languages and English as an official language for 10 years. Crucially, while the bargain agreed to the primacy of Malay political power, it tacitly recognized Chinese economic dominance as well as sizeable economic inequality along racial and regional lines.

Poverty in Malaysia had strong racial and geographical dimensions, both of which reflected Malaya’s pre–World War II history and development as a ‘dual economy’. The poor were concentrated in rural areas, lived principally outside the historical tin and rubber belt and were, by some margin, disproportionately Malays. The other group, much smaller than Malays, with egregious poverty were Chinese whom the British had forcibly moved to New Villages constructed to counter communism during the Malayan Emergency. Tables 1 and 2 divide peninsular Malaysia into the tin and rubber belt along the west coast and the traditional areas of the east coast and the extreme northwest. In 1957, traditional Malaya was overwhelmingly inhabited by Malays, who accounted for more than 90 per cent of the population in Trengganu and Kelantan. Chinese and Indians predominated in the tin and rubber areas and together outnumbered Malays.

Table 1: Population by state and race, Malaya, 1957
Source of data: Fell, 1959, pp. 3–4.
In 1970, the incidence of household poverty in traditional Malaysia was roughly twice that in the tin and rubber states. Similarly, the mean monthly income of Malay households in traditional areas was about half that of Chinese residents in the tin and rubber belt as well as significantly below the mean Indian household income. For a like set of historical regions, comparison of Malay households with those of the other races shows that Malay incomes were generally far less than those of Chinese and Indians and usually below the average for peninsular Malaya. Household incomes in urban Malaysia, where Chinese disproportionately lived, far exceeded those of rural dwellers, and for the larger cities especially so.

Table 2: Income and poverty by state, differentiated by historical economic function and strata, and race, Malaysia, 1970
Notes: a Includes a small number of persons of other races.
b The incidence of poverty is for 1976, for households and is defined as households in poverty divided by the total number of households.
c Although the tin and rubber belt began in southern Kedah, the majority of it can be regarded as 'traditional' in the 1950s.
d Metropolitan cities are defined as a population of 75,000 or more, and towns 10,000–74,999.
Sources of data: Anand, 1983; Bruton et al., 1992, p. 398.
There was a strong correlation between poverty and the low-productivity occupations of paddy farmer, coconut grower, rubber smallholder, or fisherman. Malays were concentrated in these activities, and were the mainstays of employment in traditional areas. Although between 1970 and 1984 the household poverty incidence in the traditional rural Malay occupations fell steeply, the decline was proportionately less than in urban areas where, by the mid-1980s, poverty had been largely eradicated (Table 3).
Table 3: Poverty incidence by rural and urban areas and by occupation,  Malaysia, 1970–1984
Source of data: Bruton et al., 1992, p. 399; EPU, 1981, p. 86.
In the 20 years after independence, the gap between Malay and Chinese household incomes in peninsular Malaysia widened. Although Chinese household incomes were 2.16 times those of Malays in 1957/58, by 1976 the ratio was 2.49. This was partly because between 1957 and 1970 the cultivated land area increased at 2.0 per cent a year but the population at 2.7 per cent, and because large numbers of Malays remained in rural areas. By the standard of countries with similar per capita incomes, migration to cities in Malaysia was small, a retardation which the expansion in land availability may have encouraged (Bruton et al., 1992, p. 239). Like income, land was unequally distributed in Malaysia. In 1970, corporations, principally foreign, owned 70 per cent of estate acreage. When Asians owned estates, Chinese ownership was twice the Malay acreage (Table 4).
Table 4: Measures of wealth and land inequality, Malaysia, 1957–1976
Sources of data: Snodgrass, 1980, pp. 82, 97.

Land development and poverty

The two main aspects of government-directed rural development were land expansion and a paddy programme. The aim of both was to alleviate Malay poverty through making land available to the poor (chosen on a points system) and establishing more productive, better organized farms. Both initiatives anticipated, especially until the 1970s, that Malays would remain on the land. The Federal Land Development Authority (FELDA), operational from 1956, was the most important and successful of several federal and state authorities established to increase cultivated land (Wikkramatileke, 1965, pp. 377–403; Ho, 1965, pp. 1–15).

Under FELDA, contractors—nearly all Chinese—cleared land for settlers—virtually all Malays—for allocation in small plots to grow rubber or oil palm. By 1971, FELDA schemes had spread throughout peninsular Malaya, but concentrated in its middle and south and largely excluded Perak, Kelantan, and Trengganu. From 1957 to 1970, FELDA developed some 300,000 acres of land (see for, example, Map 1), and between 1971 and 1980 a further 923,000 acres (EPU, 1981, p. 270; Snodgrass, 1980, pp. 177–178). Despite this opening and improvement of large amounts of land, FELDA and other programmes benefited a relatively small number of families (Bruton et al., 1992, p. 278). Two-thirds of rubber smallholders were Malay-owned and poverty among them, though falling considerably in the 1970s, remained unacceptable (see Table 3).
Map 1: Felda Land Development Schemes, 1957–1970
Sources of data: Wikkramatileke, 1972, pp. 64–65.

View of first FELDA oil palm project at Kulai after one year’s development, showing the centralized
residential unit and surrounding phases of main cropland. Inset gives example of six-year-old palm

Source: Wikkramatileke, 1965, p. 388.
Settlers’ house on a FELDA project
Wikkramatileke, 1972, p. 80.
Malaya’s lack of large, flat, naturally watered areas made paddy growing difficult and, despite arguments dating back decades for Malayan food self-sufficiency, rice was never, in comparison to world prices, grown economically. Help for paddy farmers focused on investing heavily in drainage and irrigation and on maintaining a guaranteed minimum price for rice above world prices. During the 1970s, some half a million acres of paddy land were provided with improved irrigation, most of which made possible double cropping. Yields increased by 50–90 per cent in areas with major irrigation projects but, for the peninsula as a whole, rice yields changed little between 1960 and 1985 (Table 5).

Settlers on a FELDA project at work on a nursery
Wikkramatileke, 1965, p. 394.
The fraction of Indians in Malaya’s population rose very sharply in the decades between 1901–1921, from just 6 per cent to 15 per cent, as rubber planting expanded and inflows were at their peak. But the Indian share of the population fell after 1931 and was just 11 per cent by 1947, as many Indian plantation workers were repatriated as a result of the rise in unemployment over the Great Depression years (Figure 1).
Beyond the plantations, Indians were recruited, inter alia, for public works, as police and guards, and also to serve in the lower ranks of the colonial bureaucracy. Most came from Tamil areas in south India. They were considered to be more accustomed to British rule, more amenable to discipline than the Chinese, and more willing to work for low wages. Access to low cost Indian labour migration helped ensure the rubber industry’s spectacular growth and profitability. Since there was work for wives and older children on the rubber estates, Indian migration included whole families. But low wages, indebtedness, poor social status, and physical isolation kept estate Indians apart and they tended to exercise little influence on Malayan society.
Table 5 Agricultural production, Malaysia, 1960–1985
Source of data: Bruton et al., 1992, p. 395.

Although by 1975 Malaysian rice output reached some 90 per cent of domestic consumption, that level of production depended on a system of subsidies, tariffs, and taxes. The government required rice importers to purchase, at a guaranteed minimum price, an amount of domestic rice equal to their imports. Importers could recover the loss on expensive (and poor quality) domestic rice by selling imported rice at the same high price—in effect a tariff on rice and so a subsidy to producers and a tax on consumers (Brown, 2007, pp. 171–172). The poverty incidence of paddy farmers, near universal in 1970, fell to three-quarters in 1976 and was still well over half in the mid-1980s, despite irrigation schemes and guaranteed prices (see Table 3). The main explanations for poverty were the fragmentation of paddy holdings, lack of double cropping, and tenancy problems.

Riots of May 1969

No one knows how many people died because of four days of race riots that broke out in Kuala Lumpur on 13 May 1969, but many more than the official figure of 196. Language rights were a source of tension since Malayan independence, and during campaigning for the 1969 general election racial appeals were made by almost all opposition parties (Snider, 1970, pp. 1071–1072). Tensions boiled over immediately once the election results severely reduced the parliamentary majority of the Alliance Party (later Barisan Nasional), a political coalition of the main and moderate Malay, Chinese, and Indian parties. After an inflammatory Malay rally, three days after the election at the residence of the Chief Minister of Selangor, Malays attacked Chinese in central Kuala Lumpur (Shaplen, 1977, pp. 114–116; Milne, 1970, p. 565; Tilman, 1963, pp. 906–907; Thomas, 2021, pp. 28–30).

Economic factors may not have been wholly responsible for the rioting but were important. ‘Whatever their proximate causes’, the riots ‘owed their origin to inadequate efforts to redress socio-economic imbalances’ (EPU, 1976, p. 6). These included great income inequality, the frustration of Malays with it, a perceived lack of Malay access to better jobs, and a greater number of urban Malays to directly feel the realities of racial imbalances. It was clear to all communities that the ‘Bargain of 1957’ was no longer acceptable; there had to be more equality effected through a new political contract.
The 1969 general election was the ‘culmination and termination’ of the politics underlying the Federation of Malaya, and a ‘turning point for Malaysian political development’ (Rudner, 1970, pp. 17–20). It followed from this change that the 1971 New Economic Policy (NEP), which resulted from the election, marked a ‘genuine new departure for Malayan development policy’, and another ‘turning point’ in post-independence Malaysian history (Snodgrass, 1980, p. 60; Bruton et al., 1992, p. 266). The NEP set an agenda that offered opportunities for the Malay elite but threatened the status of Chinese and Indians—a socio-political unease that Malaysia still faces after more than half a century of NEP implementation.

Anand, S. 1983. Inequality and Poverty in Malaysia: Measurement and Decomposition. World Bank research publication. NY: World Bank.
Bailey, C. 1983. The Sociology of Production in Rural Malay Society. Kuala Lumpur: Oxford University Press.
Brown, C. P. 2007. ‘Rice price stabilization and support in Malaysia’. The Developing Economies, 11(2), pp. 164–183.
Bruton, H. J., Abeysekera, G., Sanderatne, N., and Zainal Aznam Yusof. 1992. Sri Lanka and Malaysia. Oxford: Oxford University Press.
Cheah, B. K. 1987. Red Star Over Malaya: Resistance and Social Conflict During and After the Japanese Occupation of Malaya, 1941–1946. Singapore: Singapore University Press, p. xiii, pp. xiii–xiv, p. 296.
______ 1981. ‘Sino-Malay Conflicts in Malaya, 1945-1946: Communist Vendetta and Islamic Resistance’. Journal of Southeast Asian Studies, Vol. 12, No. 1, Ethnic Chinese in Southeast Asia (March 1981), pp. 108–117.
Colonial Office (CO). 1945a. CO 273/675/7. Future policy in Malaya. Kew: The National Archives.
______ 1945b. CO 273/677/11. Memorandum by Sir Shenton Thomas on Post-war Malaya. Kew: The National Archives.
Economic Planning Unit–Malaysia (EPU).1976. Third Malaysia Plan, 1976–1980. Kuala Lumpur: Government Printers.
______ 1981. Fourth Malaysia Plan, 1981–1985. Kuala Lumpur: Government Printers.
Fell, H. 1959. Population Census of the Federation of Malaya 1957, Report No. 14. Kuala Lumpur: Department of Statistics–Federation of Malaya.
Harper, T. N. 1999. The End of Empire and the Making of Malaya. Cambridge: Cambridge University Press.
Ho, R. 1965. ‘Land Settlement Projects in Malaya: A Review of Problems and Prospects’. Journal of Tropical Geography, Vol. 20, pp. 1–15.
Jones, F. C. 1954. Japan's New Order in East Asia: Its Rise and Fall, 1937–45. Oxford: Oxford University Press, p. 390.
MacMichael, H. A. 1946. Report on a Mission to Malaya, (October, 1945–January, 1946). London: H.M.S.O.
Milne, R. S. 1970. ‘"National Ideology" and Nation-Building in Malaysia’. Asian Survey, Vol. 10, No. 7, pp. 563–573.
Rudner, M. 1970. ‘The Malaysian General Election of 1969: A Political Analysis’. Modern Asian Studies, Vol. 4, Issue 1, January, pp. 1–21.
Shaplen, R. 1977. ‘Letter from Malaysia’. The New Yorker. April 18 issue, pp. 109–131.
Shaw, W. 1976. Tun Razak: His Life and Times. Kuala Lumpur: Longman Malaysia Sdn. Berhad.
Snider, N. L. 1970. ‘Race, Leitmotiv of the Malayan Election Drama’. Asian Survey, Vol. 10, No. 12, pp. 1070–1080.
Snodgrass, D. R. 1980. Inequality and Economic Development in Malaysia. Oxford: Oxford University Press.
Tilman, R. O. 1963. ‘Malaysia: The Problems of Federation’. The Western Political Quarterly, Vol. 16, No. 4, December, pp. 897–911.
Thomas, T. 2021. My Story: Justice in the Wilderness. Petaling Jaya: Strategic Information and Research Development Centre.
The Times, London. 1963. ‘Threat to abandon the Malaysia project’, 9 September.
Wikkramatileke, R. 1965. ‘State Aided Rural Land Colonization in Malaya: An Appraisal of The F. L. D. A. Program’. Annals of the Association of American Geographers, Vol. 55, Issue 3, September, pp. 377–403.
______ 1972. ‘Federal Land Development in West Malaysia 1957–1971’. Pacific Viewpoint, 16, pp. 62–86.


c/o Asia-Europe Institute
University of Malaya,
50603 Kuala Lumpur
Generic Popup